Exercise 14-3 Financial Ratios for Asset Management [LO14-3) Comparative financial statements for Weller Corporation, a merchandising company, for the year ending December 31 appear below. The company did not issue any new common stock during the year. A total of 700,000 shares of common stock were outstanding. The interest rate on the bond payable was 10%, the income tax rate was 40%, and the dividend per share of common stock was $0.75 last year and $0.40 this year. The market value of the company's common stock at the end of the year was $28. All of the company's sales are on account Weller Corporation Comparative Balance Sheet (dollars in thousands) This Year Last Year Assets Current assets: Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Property and equipment $ 1,240 9,000 14,000 630 24,870 $ 1.310 8,200 12.100 530 22,140 Land 10,700 47,707 58,407 $83,277 10,700 36,704 47, 404 $69,544 $19,600 1,040 130 20,770 $18,800 760 130 19,690 Buildings and equipment, net Total property and equipment Total assets Liabilities and Stockholders Current liabilitiest Accounts payable Accrued liabilities Notes payable, short term Total current liabilities Long-term liabilities: Bonds payable Total liabilities Stockholders' equity Common stock Additional paid-in capital Total paid-in capital Retained earnings Total stockholders' equity Total liabilities and stockholders' equi 8.600 29,370 8.600 28, 290 700 4,000 4,700 700 4.000 4.700 36.554 41,254 $69,544 53,907 583,277 Weller Corporation Comparative Income Statement and Reconciliation (dollars in thousands) This Year Last Year Sales $78.260 $66.000 Cost of goods sold 37,845 39,000 Gross margin 40, 41527,000 Selling and administrative expenses: Selling expenses 11,500 10,100 Administrative expenses 6,500 6.600 Total selling and administrative expenses 18.000 16,700 Net operating income 22,415 10,300 Interest expense 860 860 Net income before taxes 21,555 9,440 Income taxes 8,622 3,776 Net income 12,933 5,66 Dividends to common stockholders 280 35 Net Income added to retained earnings 12,653 5.3 Beginning retained earnings Ending retained earnings $49,207 Required: Compute the following financial data for this year: 1. Accounts receivable turnover. (Assume that all sales are on account.) (Round your answer to 2 decimal places.) 2. Average collection period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.) 3. Inventory turnover. (Round your answer to 2 decimal places.) 4. Average sale period. (Use 365 days in a year. Round your intermediate calculations and final answer to 2 decimal places.) 5. Operating cycle. (Round your intermediate calculations and final answer to 2 decimal places.) 6. Total asset turnover (Round your answer to 2 decimal places.) days 1. Accounts receivable turnover 2. Average collection period 3. Inventory turnover 4. Average sale period 5. Operating cycle 6. Total asset turnover days
